This essay will discuss the system of thought known as Neo-classical economics, the criticisms made of this system by the Neo-Ricardian school, and finally and especially, the relationship of Neo-Ricardianism to Marxism. The treatment of Neo-classical and Neo-Ricardian economics has been made deliberately general, in order to keep the argument clear and avoid confusion. At present academic economics in the capitalist world is in a state of confusion, as its dominant system of thought—Neo-classicism—comes under attack. Despite the elaborate mathematical reformulations it has undergone in recent years, this kind of economics differs very little in its fundamentals from what Marx, a century or more ago, contemptuously described as ‘vulgar economy’—the systematization of what is immediately visible in the sphere of market relations: individual preferences, prices and exchange. Throughout this paper, therefore, the terms ‘vulgar economy’ and ‘neoclassical economics’ will be used interchangeably. Vulgar economy can be characterized in the most general terms as follows. footnote1

In the first place, it is individualist, and subjectivist, seeing society as a collection of individuals whose nature is, for analytical purposes, assumed to be given or predetermined, quite independently of the social phenomena under consideration. Its object is to explain these social phenomena by relating them to the psychological characteristics of the given individuals and the initial situation in which they find themselves. In vulgar economy the individual plays a precisely analogous role to the atom in Newtonian mechanics. Just as Newtonian mechanics sees material reality as the interaction of unvarying or eternal atoms, so vulgar economy sees social reality as the interaction of individuals whose natures are invariable or permanent. Society is explained in terms of the individual, rather than the individual in terms of society. This stands in sharp contrast to the view of Marxists and such non-Marxists as Durkheim, who see the individual as the product of society and who seek to explain social phenomena in terms of social laws which do not derive from the individual. Indeed, in Marx’s work the individual appears merely as the representative or bearer (Träger) of specific social relations. The accumulation of capital, for example, is not seen as the result of capitalist greed or subjective time-preference, but as an expression of the immanent laws of capitalist development, which can be understood without any reference to the subjective characteristics of the individual capitalist.

In the second place vulgar economy suffers from what might be described as naturalism. Since even the most superficial description of what are generally regarded as economic phenomena cannot escape the fact that things are produced, production must somehow or other be included within the scope of vulgar economy. The way in which production is treated, however, is remarkably similar to the way in which the individual is treated. Just as the individual is assumed to be asocial, so too is production. Instead of seeing production as a social process in which human beings combine together within a specific framework of social relations, vulgar economy sees production as an asocial or natural process in which inputs of labour, land and means of production, misleadingly described as capital, are mysteriously transformed into outputs of material and non-material goods.

In so far as property relations enter into this picture, they relate not to the labour process, or what Marx called the appropriation of nature, but to the distribution process, or what Marx called the appropriation of the product. Thus, when Debreu talks of a private ownership economy he is referring, not to the fact that the capitalist employs the worker and organizes production, but to the fact that some people have a claim to part of the social product, deriving from their ‘ownership’ of the means of production. footnote2

Finally, vulgar economy is characterized by the primacy it accords to market phenomena or exchange. This is hardly surprising. Given the fact that society is seen as an agglomeration of individuals whose nature is fixed, who do not combine together in a social production process and whose only link with each other is through the buying and selling of commodities, market phenomena must inevitably assume primary importance.